The lawsuit alleges that ID Lifeguards Inc., and its owner, Arthur Natanyan of Burbank, Calif., broke the state's consumer fraud law and duped consumers into buying identity protection for $12.95 a month after they responded to sales offers for other products on third-party websites. Between September 2009 and March 2010, the company charged $157,562 for services that showed up on the phone bills of 5,071 Illinois consumers under miscellaneous charges, court papers said.

A man who answered Natanyan's phone at the company said the owner was not available for comment.

ID Lifeguards did give refunds to 2,832 consumers for a total of $107,356, but the lawsuit said the high amount of refunds -- 56% of all consumers billed in the state -- "indicates defendants were submitting unauthorized charges for services consumers did not want and were not using." The lawsuit also alleges the company's websites promised credit reports to consumers but never sent them.

"The defendants in this case claim to be in the business of identity protection, but in fact they're in the business of scamming people out of their hard-earned money," Madigan said in a statement. "Unfortunately, it is fairly easy for companies to add charges to your telephone bill that have nothing to do with your phone service. Consumers should be aware of this and carefully check their phone bills each month for any additional charges."

The lawsuit seeks restitution for consumers, a civil penalty of $50,000 per defendant, another penalty of $50,000 for each incident and a ban from providing identity protection services in Illinois.

The U.S. Federal Trade Commission said consumers need to know what they are getting when they sign up for identity protection. Federal and state laws can help consumers protect their identities for free, including placing fraud alerts on credit reports so creditors have to verify consumers' identities before issuing credit. Every consumer is entitled under federal law to a free credit report from each nationwide consumer reporting company once a year.